Robinhood Q2 preview: where next for Robinhood shares?

Robinhood will release its first set of quarterly results since completing its IPO this week and its horde of retail investors will be closely watching how it responds to their questions. We explain what to watch out for and what markets are expecting.

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When will Robinhood release Q2 results?

Robinhood will release second quarter earnings on Wednesday August 18.

Robinhood Q2 earnings preview: what to expect from the results

The jury is still out on Robinhood following the company’s IPO on July 29. A lacklustre start saw its shares fall from its $38 listing price to as low as $33 on its second day of trading before rallying to as high as $85 in a matter of days. This morning, Robinhood shares sat closer to $50 before the opening bell kicked off another week of trading.   

This will be Robinhood’s first opportunity to engage the market since its IPO and is striving to improve transparency and install confidence among individual retail investors that also make up its customer base. After all, it has reserved as much as 35% of its shares for customers to buy through its app – meaning Robinhood customers will be able to buy Robinhood shares on the Robinhood app. Keeping individual investors on side will be key to not only retaining customers but also investors.

As a result, the company has launched a Q&A platform that allows shareholders to submit questions to management ahead of the results, with the ability to upvote those posed by other investors.

Within the growing list of questions, the most popular in terms of shares at the time of writing were:

  • Is Robinhood getting a crypto wallet?
  • Are there any plans to launch Robinhood in other countries?
  • When do you think we will get features such as having multiple accounts, joint accounts and beneficiaries?
  • As initial investors, can we get a Robinhood hat and hoody jacket?
  • Why does it take seven days for a deposit to clear? Can timing decrease?
  • Why are deposits capped at $50,000?
  • Is there a plan to allow users to gift stocks to one another?
  • Assuming Robinhood starts offering IRAs, will we be able to have multiple accounts? And would crypto be allowed in a Robinhood IRA?
  • Will Robinhood pay out a dividend in the future?

This shows individual investors are hungry to find out information how the platform can be improved, what new products and services are coming and how it plans to expand. Queries about launching multiple accounts and Individual Retirement Accounts (IRA) feature often throughout the list. The popularity of the idea to throw in free Robinhood clothing is a reminder that many are not just investors but customers, and that they can often get their priorities wrong.

The results will undoubtedly inject more volatility into an already volatile stock – something that will only gain momentum the more individual investors pile-in. Robinhood has become known for being the platform of choice for retail traders looking to speculate on so-called meme stocks such as GameStop and AMC, but there are fears that Robinhood could itself undergo the meme stock experience that delivers sharp and unpredictable share price movements. The fact its lock-up period that prevents investors from selling shares is only three months long compared to the traditional six will also bring forward an event that usually causes greater volatility.

Robinhood ended March with 17.7 million monthly active users and $81 billion of assets under management. It added 6 million new users in the first quarter of 2021 amid the latest frenzy in meme stocks and grew AUM by 28%, and investors will be closely watching to see if growth is still accelerating.

In terms of the financials, analysts are expecting Robinhood to report revenue of $521.8 million and a net loss of $514.1 million. That would compare to the $244.2 million in revenue and the $57.6 million net profit booked the year before, and the $522.2 million in revenue and hefty $1.44 billion loss booked in the first quarter of 2021.

One topline figure that will be closely-watched is the amount of revenue coming from payment-for-order-flow. This is money Robinhood is paid for directing its customer’s trades through brokerages that actually execute the orders. PFFO is the main driver of revenue, accounting for over 80% of topline income in the first quarter, but also one of the biggest concerns about Robinhood’s future. The chairman of the SEC, Gary Gensler, has said he is looking closely at PFFO and there are proposals on the table that could possibly lead to an outright ban in the US – like it already is in the likes of the UK and Canada. Robinhood lists regulatory changes surrounding PFFO as one of the key risks facing the business, and individual investors have also posed questions about how the company plans to diversify its income or respond to any crackdown ahead of the quarterly results.

How to trade Robinhood shares

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